Reuters – Oil prices fell on Wednesday after a report showed a rise in U.S. crude inventories, but global markets remained tense amid an intensifying political crisis in Venezuela, tightening U.S. sanctions on Iran, and ongoing OPEC supply cuts.
Brent crude oil futures were at $71.52 per barrel at 0652 GMT, down 54 cents, or 0.8 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were down 66 cents, or 1 percent, at $63.25 per barrel.
Trading was thin as May 1 is a holiday in many markets.OPEC
U.S. crude stocks rose by 6.8 million barrels to 466.4 million barrels in the week to April 26, industry group the American Petroleum Institute (API) said on Tuesday.
“Crude prices are off … after the weekly API oil inventory report showed a build of 6.8 million barrels, up from the draw of 3.1 million barrels we saw last week,” said Edward Moya, senior market analyst at futures brokerage OANDA.
Market focus was shifting, however, to the crisis in major oil producer Venezuela, where there is a standoff between President Nicolas Maduro and opposition leader Juan Guaido. Many observers fear this could lead to escalating violence and further disruptions to crude supply.
Oil markets have already tightened this year due to supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) as well as U.S. sanctions on Iran’s oil exports.
Washington re-imposed sanctions on Tehran last November, but initially allowed its major buyers limited imports for another six months.
These exemptions expire on Wednesday, and Washington has said it will not extend any waivers as it aims to drive down Iranian crude exports to zero.
“The Iran sanctions come on top of already fragile supplies and raise concerns about tightening markets,” said Norbert Ruecker, head of research at Swiss bank Julius Baer.
Some analysts, though, say global oil markets are still amply supplied.
Stephen Innes, head of trading at SPI Asset Management, said OPEC “could quickly compensate the losses from Iran supplies.”
OPEC is due to meet in June to discuss its production policy, and while Washington has put pressure on the group to increase output to make up for the shortfall from Iran, OPEC’s de-facto leader Saudi Arabia said on Tuesday it had no immediate plans to raise output.
Ruecker said despite this OPEC’s “petro-nations are unlikely to maintain their supply curbs” as U.S. pressure on them to raise output would rise amid surging gasoline prices.
Rising U.S. output, which has already jumped by around 2 million barrels per day (bpd) over the past year to a record 12.2 million bpd, may also ease market tightness.
“Activity is picking up and oil production is set to accelerate again,” Ruecker said, adding that these factors will prevent a prolonged oil price rally.
Analysts at Bernstein Energy said in a note on Wednesday that given the overall supply and demand fundamentals, “Brent oil is back to our expected fair value of $70 per barrel.”
Graphic: U.S. oil output, exports are rising (tmsnrt.rs/2ULQi5F)
Reporting by Henning Gloystein; Editing by Tom Hogue and Richard Pullin